Italian asset managers assess euro risk

Italian asset managers believe the risk of a break-up of the Eurozone is too small to influence their portfolio construction, according to a Reuters survey of 13 asset managers operating in Italy.

A greater fear is the continued deterioration of the sovereign debt crisis, with an agreement on the restructuring of Greek debt continuing to prove elusive.

Marco Bonifacio, head of research at Zenit Sgr, said the likelihood of a break-up was minimal and that it has not affected their asset allocation decisions.

Giordano Lombardo, group chief investment officer di Pioneer Investments, part of the UniCredit group, said their portfolios do not take into account a potential break-up of the Eurozone. However, he said: “we do take into account the difficulty in finding a solution to the Eurozone crisis by having a low exposure to EMU shares and bonds.

For Credem, the Eurozone crisis and its continued deterioration is already almost wholly priced in. Nevertheless, it remains “the principal driver” for the investment strategies and for the asset allocation strategies. Yields on Italian and Spanish bonds benefited from the European Central Bank’s policy of unlimited liquidity over three years, leaving Greece as the unknown factor.

Athens is under growing pressure to agree with private investors a deal on the restructuring of its debt to them, a necessary pre-condition to release the second tranche of financial support that will enable the Greek government meet the €14.5bn debt pile being rolled over on March 20.

Alessandro De Carli, head of quantitative total return funds di Eurizon Capital sgr, said: “The failure of the Greek debt negotiations does not mean the break-up of the Eurozone but the possible start of another period of instability in financial markets, in which investors would once again reduce their exposure to equity and the region’s banks.”

“We hedge our portfolios against the risk of an orderly or a disorderly default in Greece. For example, we occasionally use cash to cover the Euro-area risk. We are a bit long on dollars at the moment.”

Other hedges include futures positions giving exposure to yen and to the Vix volatility index and buying ‘put’ options on risky asset classes.

Valentina Carnevali, fund manager at independent asset manager Azimut, said she does not expect the ‘end of the euro’, but “it is possible that some countries, such as Portugal or Greece may have to restructure their debt. We cover these risks with a diversification strategy for our portfolios”.

Others see risk as less of a problem. Giulio Zucchini, investments director at BPVi fondi, said: “We believe the risk potential is exaggerated. We expect euro volatility and weakness in government debt of the region, but with higher yields over the long-term.”